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Microsoft throws cold water on Yahoo earnings

CEO Steve Ballmer says a favorable first-quarter earnings report for Yahoo wouldn't translate into a higher bid for the Internet search pioneer.

Updated 8:45 a.m. PDT to include comments from Microsoft.

Microsoft just threw cold water on hopes that a better-than-average Yahoo earnings report Tuesday would likely yield a higher buyout bid for the Internet pioneer.

Microsoft Chief Executive Steve Ballmer, speaking in Morocco for the launch of the software giant's North Africa Web portal, issued these comments, according to a Reuters report:

"We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders," Ballmer said, according to the report. "I wish Yahoo all the success with its results, but it doesn't affect the value of Yahoo to Microsoft."

A number of Wall Street soothsayers and Microhoo observers have been speculating for weeks that a strong first-quarter earnings report from Yahoo could serve as a face-saving catalyst for Microsoft to increase its bid and draw Yahoo into formal negotiations.

While Yahoo's first-quarter results may not affect the value of Yahoo to Microsoft, it could affect the stubborn factor for Yahoo and its institutional investors, who may dig in their heels even more on wanting a higher buyout bid should the Internet pioneer perform well on its earnings report.

The New York Post, citing several sources close to Yahoo, reported Tuesday that the Internet company will "not blow the lid off earnings, but will likely beat analysts' expectations."

Wall Street is expecting Yahoo to report earnings of 9 cents a share and revenue of $1.32 billion, which excludes traffic acquisition costs, according to a consensus of analysts reported by Thomson Reuters. Yahoo will report its first-quarter results after the markets close Tuesday, in what is expected to be one of its most closely watched earnings reports.

The high end of the analyst range is 14 cents a share; earlier in the year, Yahoo's management gave a revenue range that topped out at $1.38 billion, excluding traffic acquisition costs.

One great little "cheat sheet" to stack up the performance of Yahoo's first quarter is provided by Citigroup Global Markets analyst Mark Mahaney. Here's his guide for tracking the quarter:

10,000- foot items:

  • Comments on impending Microsoft offer

  • Comments on macro environment impact on Yahoo's display business

  • Improvements to search monetization and Google search test results

  • Ad networks/exchange rollout

  • Buyback of Yahoo shares

Nitty-gritty Q1:
  • Revenue, excluding traffic acquisition costs: $1.32 billion meets Wall Street estimates/$1.34 billion meets Citi's estimates. Wall Street expects a 6 percent quarter-over-quarter revenue decline.

  • EBITDA: $435 million meets Wall Street and Citi's estimates. Look for 33 percent EBITDA margin

  • GAAP earnings per share: 9 cents per share meets Wall Street estimates /10 cents meets Citi's estimates.

  • Owned and operated display ad revenue growth, year over year: More than 18 percent growth is considered good; 15 percent to 18 percent is so-so; and Citi's estimate is 17.8 percent.

  • Owned and operated search advertising revenue growth, year over year: More than 28 percent is considered good; 25 percent to 28 percent is so-so; and Citi's estimate is 27.7 percent.

Future forecasts
  • Second-quarter revenue, excluding traffic acquisition costs: $1.37 billion meets Wall Street estimates/$1.39 billion meets Citi's estimates. Wall Street expects a 10 percent year-over-year growth.

  • EBITDA: $460 million meets Wall Street estimates/$456 million meets Citi's estimates.

So, with this score card, tune into Yahoo's earnings report, following the market's close later on Tuesday.